J.P. Morgan leads banks with dividend-hike plans

LizMoyer

NEW YORK (MarketWatch) -- J. P. Morgan Chase & Co. led a flurry of the biggest U.S. banks in announcing dividend raises and stock buybacks, two days before the Federal Reserve had been set to release the results of this year’s stress tests.

J.P. Morgan’s surprise announcement Tuesday, that it would increase its dividend by a nickel and launch a new $15 billion stock repurchase program, sent rival banks scrambling to make their own announcements. The Fed moved up the release of the results to 4:30 EDT on Tuesday.

Morgan Stanley
MS, +0.07%
said Tuesday it received no objection from the Fed for its 2012 capital plan, including the potential cash acquisition of an additional 14% of Morgan Stanley Smith Barney and ongoing payment of current common and preferred dividends.

US Bancorp
USB, +0.35%
boosted its dividend by 56%, and PNC Financial Corp.
PNC, +1.35%
said it passed the stress test, according to a person familiar with the matter. BB&T Corp.
BBT, +0.90%
said the Fed had no objection to it raising its dividend by 4 cents.

J.P. Morgan said on Tuesday “we are pleased to be in a position to increase our dividend and to establish a new equity repurchase program.”

The Fed had planned to release the results of this year’s Comprehensive Capital Analysis and Review, or stress tests, on Thursday afternoon. It decided to move up the timing after some banks had disclosed their results, the Fed said. The tests look at how the 19 biggest U.S. banks would fare in a severe downturn, including an unemployment rate of 13%, a 21% decline in housing prices and a 50% drop in equity prices.

Many banks were expected to raise dividends and increase share buybacks four years after the financial crisis as capital levels have improved and losses from bad loans continued to abate. Last year was the first time since the crisis that several banks were allowed to raise dividends.

In a report last month, Credit Suisse analysts estimated U.S. banks could double their capital payouts to shareholders, projecting an average of 47% of their earnings in 2012, up from 23% last year.

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